What to do Pre-Application

For you or your loved ones getting a mortgage may seem a little bit like climbing Everest. The summit is incredibly far away and it’s going to be a long journey that requires a lot of commitment. That’s because the process of buying a home doesn’t start by selecting a property that’s within your budget – it can take months, even years of preparation to get fully mortgage-ready.

There are a number of things you can do in advance to prepare for a mortgage application that will make the whole process a lot easier and smoother for you. These include but are not limited to:

Saving for a deposit
This might sound like a simple and obvious piece of advice but it is still incredibly important. The more you’re able to save for a deposit means the less you will need to borrow from the lender, which means that you’re taking on less debt.

This means that you will have a smaller loan-to-value which will generally allow you access to lower mortgage rates so you will be paying less interest across the mortgage term. Ultimately having a larger deposit can save you money in the long run and your adviser will be able to help you secure the deal that’s right for you dependant on the size of your deposit.

Register to vote
Registering to vote, if you’re not already on the electoral register, is the easiest thing you can do to get yourself mortgage-ready. Without being registered it’s almost impossible to get a mortgage as the majority of lenders use the electoral roll data for identity checks – for this reason, it’s also important that you make sure your address history is up to date and that your forms of identification are accurate.

Build up your credit score and review your credit history
Check your borrowing history in advance. This will allow you to dispute any inaccuracies so that lenders will receive the correct information on your ability to repay your debts. Your credit score, on the other hand, will give an indication of how creditworthy lenders may find you. If your score is low, you may want to see if there are any credit habits that you need to improve on before making a mortgage application. It’s important to note, though, that scoring bands can vary among different credit reference agencies which is why seeking professional advice is important.

Clear your debt or reduce your debt-to-income ratio
Your debt-to-income ratio is the proportion of debt that you have in relation to the money you earn – the higher this number, the more debt you have. Lenders typically prefer applicants with a lower ratio as it means you’re more likely to have the funds to make your monthly mortgages repayments. If you’re in a position to be able to clear your debts completely this will make you more attractive to potential lenders.

Saving for other fees
Whilst saving for a deposit is somewhat obvious, there are also a number of other fees and costs that you realistically need to be saving for before applying for a mortgage. There are conveyancing fees, paid to your solicitor to cover all of the legal work associated with buying a home, and moving costs that, among other things, need to be considered.

While this is only an overview of just some of the things you can do to get yourself mortgage-ready your mortgage adviser will be able to give you more detail on how to fully prepare yourself.

If you want more advice on how to become mortgage-ready contact your adviser today. If you’d like to discuss the options available to you, contact your adviser today.

If you’d like to discuss the options available to you, contact your adviser today.

Most first-time buyers don’t know when the Help to Buy ISA ends

First-time buyers are living in a time when it appears to be much harder to get that first step onto the property ladder than ever before. House prices have increased by a massive 554% in the last 30 years and the time it now takes so save for a deposit has also substantially increased.

According to Nationwide, a decade ago it would take the average first-time buyer in the UK less than five years to save a 10% deposit of £14,080. Contrast that with today when it takes on average six and a half years to save a 10% deposit of £18,480.

This is why many first-time buyers have turned to the government Help to Buy ISA – launched over three years ago, the Help to Buy: ISA offers first-time buyers the opportunity to save up to £200 a month with the government topping up their contributions by 25%, up to a maximum of £3,000.

But… many first-time buyers aren’t aware of the scheme’s details. Almost two thirds of prospective first-time buyers are unaware of the cut-off date for the Help to Buy ISA, research by specialist bank Aldermore has found.

The deadline to open a government Help to Buy ISA is 30 November this year but contributions can still be made until November 2029, and the cut-off date to claim the bonus is 1st December 2030 – so there’s still time for your loved ones to open an account and start claiming their 25% bonus for their first home.

Over four fifths of potential first-time buyers don’t know what the minimum government bonus is either, while 80% don’t know what the maximum is. There is also a lack of understanding about the scheme from parents too.

Almost nine in 10 parents of first-time buyers are unsure what the minimum government bonus is, while a similar proportion are unsure what the maximum bonus is. But, when the parents were given an explanation of what the Help to Buy ISA is, 86% said they would encourage their child to save into a Help to Buy ISA.

So, with only six months to go, if you or your loved ones would like to discuss the Help to Buy ISA so that they can start boosting their savings for when they’re looking to buy a home in the next three, five or even ten years, you should seek professional advice today.

More lenders are offering 95% loan-to-value mortgages

Since the financial crisis in 2008 lenders have been reluctant to offer high loan-to-value mortgages which has resulted in many of us being unable to afford our dream homes or take our first step onto the property ladder.

Without the help of high loan-to-value mortgages some will have spent years saving for a deposit, are still living with parents, or are stuck in the rental cycle. The dream of owning our own homes seems somewhat in the distance.

But are times changing?
The number of mortgage providers that include a maximum 95 per cent loan-to-value product in their range now stands at 60*, up from 53 a year ago and 13 more than five years ago, according to Moneyfacts. This is great news for potential first-time buyers and home movers.

A decade ago a borrower with a five per cent deposit had just three products from three mortgage providers to choose from. Today, you have a choice of a massive 405 products, including 67 variable deals, from a huge total of 60 providers*.

More than four fifths of mortgages available at a maximum 95% loan-to-value are fixed rate mortgages, accounting for 338 products of the 405 available.

These deals enable you borrowers to have the certainty of knowing what your monthly repayment amount will be. This is perhaps of particular importance to those you who are taking their first steps onto the property ladder.

With the number of high loan-to-value options now available it’s important to seek professional advice. Your adviser will be able to find the right mortgage for you, or your loved one’s specific circumstances should they want to take that first step onto the property ladder, which can be invaluable.

If you, or someone you know, would like to take advantage of the high loan-to-value mortgages available, please contact your adviser today.

* Number of products correct as of 16/04/2019

Do your loved ones need a helping hand onto the property ladder?

Compared with a decade ago, today’s first time buyers are older, more likely to buy with a partner and more likely to have dependent children. This highlights how it is becoming increasingly hard for younger borrowers to get on the property ladder. But, lenders are always introducing new propositions to ensure there are solutions in place to help prospective homeowners buy their first property. It could be you that helps them!

Past and present
The 1980s, perhaps best known for its music and the invention of Super Mario. But it was also a time when the average house price was £22,676 and the average deposit was £3000. Fast forward to 2018 and we see a completely different picture, the average house price is £224,353 and the average deposit costing you £34,000. This shows a whopping growth of around 890% in house prices! However, wage growth hasn’t seen the same hike and so it comes as no surprise borrowers are continuously finding it harder.

For many, the Bank of Mum and Dad seems like the only option. According to the Social Mobility Commission, over 30% of UK households with dependent children hold assets that could be used towards a deposit for the purchase of a home. This could lead to an increase in the number of first time buyers turning to help from their family. The Social Mobility Commission’s research suggests this could rise to nearly 40% by 2039/40. Do you hold assets that could provide the gift of a life time for your loved ones?

How can I help my loved one get on the property ladder?
Improving affordability
Joint borrower, sole proprietor mortgages are one solution that may help. They’re aimed at bridging the gap between salaries and house prices and geared towards helping close family members get onto the property ladder or move home.

Lend a helping hand to your children’s plans of purchasing their first home! Joint borrower, sole proprietor mortgages allow you to support your family by adding your name to the mortgage, essentially increasing income and increasing the maximum loan available to them. Your name will only be on the mortgage and not the deeds so you will therefore be exempt from the 3% stamp duty surcharge for second properties.

Raising a deposit
Affordability is not the only challenge to first time buyers and joint borrower, sole proprietor mortgages may not be the best solution for everyone, so there are other options you may want to consider. If your loved ones cannot raise a deposit, you can still help. You can use your property or savings as security for their mortgage, as opposed to gifting them a deposit. Many lenders are offering these types of products.

So if you want to talk about how you can take your first steps onto the property ladder, or to discuss your options, call one of our advisers today.

Give the gift of a deposit this Christmas!

What is a gifted deposit?

A gifted deposit is a sum of money that is given by somebody, usually a family member, which forms all or part of a deposit for someone buying a property.

What do you need to know?

  • It is important to remember that if you gift a deposit, it is just that, a gift. This means you will be required to sign a written declaration that states it is a gift and that the home buyer is not required to pay it back.
  • If you plan to give a gifted deposit you should seek independent advice to ensure you understand you will not have an interest in the property or the right to get your money back.
  • Most lenders will accept gifted deposits from close family members and a few will even accept gifted deposits from more distant relatives and friends.
  • The lender or solicitor may request to see a bank statement or other documentation to evidence where the gifted deposit has originated from.
  • A gifted deposit can be used alongside the applicant’s own savings or the Help to Buy scheme.

What are the alternatives to gifting a deposit?

There are many other ways parents can support their children when purchasing their first home and different ways borrowers can maximise their savings for their deposit.

  • Low-deposit mortgages – the availability of products that offer a 95% or 90% LTV has substantially increased. This means that mortgages are now more accessible for buyers with smaller deposits.
  • Guarantor mortgages – parents can be named on the mortgage to enhance the affordability for the first time buyer. They can also offset their savings or even take out a joint mortgage with their children.
  • Government schemes – if the buyer can’t be helped by their family, government schemes such as Help to Buy or Shared Ownership could be good options.
  • Help to Buy ISA – as well as the government schemes listed above, a Help to Buy ISA could assist the buyer in saving a larger deposit. The Help to Buy ISA provides a 25% bonus to first time buyers on a limited amount of savings when it is being used to purchase a house.

If you would like more information about giving a gifted deposit or other options for first time buyers then speak to one of our advisers today.

No deposit? We could still help.

Picture1If you only have a small deposit, or do not have one at all, it may still be possible for you to obtain a mortgage.

There is a lender who will allow you to take out a personal loan to use as your deposit.

You need to pass the lenders affordability to show that you can afford the mortgage payments as well as the loan repayments. You will also need to meet the rest of the lending criteria.

However, this is ideal for someone with sufficient income but a low amount of savings.